LEISURE LETTER (06/17/2015)

EVENTS

June 23, 2015 - CCL Q2 2015 earnings call 10am

HEADLINE NEWS

Macau full smoking bill -

Macau’s Secretary for Social Affairs and Culture, Alexis Tam Chong Weng, said the government would send the bill to the city’s Legislative Assembly before the end of the month. The government remains committed to a full smoking ban, including the removal of enclosed smoking lounges currently located on some casino mass floors

But a group said to be representing Macau’s casino operators on the smoking issue said that the companies hoped there was still the chance of an alternative solution.

Macau CEO Fernando Chui Sai On said that whether a blanket casino smoking ban would affect Macau’s gaming revenue remained to be seen, pointing out that gaming receipts have been decreasing for the last 12 months despite the absence of a complete smoking ban in casinos.

“… I don’t think the decreasing gaming revenue for 12 months is due to a smoking ban,” said Chui, adding the government would monitor what happens once the blanket smoking ban is in place and that the law would be reviewed every three years.

Takeaway: Full smoking ban bill on its way - not unexpected but not good either.

COMPANY NEWS

SGMS- Bally Gaming has reached an agreement to provide at least 2,000 VLTs to the Oregon Lottery. The Company has submitted the product and software to the Oregon Lottery and will begin shipping games later this year, after completion of a field trial and receipt of approval from the Oregon Lottery. All games will be part of a multi-game suite on the Bally ALPHA 2 Pro V32 cabinet.

Takeaway: As mentioned yesterday, there could be another 5,000 VLT upgrades up for grabs for the suppliers in Oregon.

MGM - Kirk Kerkorian, has died at the age of 98. Tracinda Corp, the holding company founded by Kirk Kerkorian, said the billionaire's will requires the company to dispose of its stake in MGM. Tracinda had a 16.2% stake in MGM Resorts, according to the company's filing on Tuesday. (Roughly $1.75 billion worth)

Takeaway: 32% ship share is about right for IGT. Earlier, SGMS had reported 44% new slot share or roughly 26% total ship share for Plainville, according to our estimates.

HLT - Offering a deal for summer travel in China, and Hong Kong. Bookings made between June 15 and August 14, 2015 and completed between June 17 and December 31, 2015 at participating Hilton Worldwide hotels, will enjoy savings of up to 25% off the Best Available Rate.

HT - Hersha Hospitality Trust has acquired the St. Gregory Hotel & Suites south of Dupont Circle for $57 million, its third hotel in D.C. ($386,000 per key) The property was acquired from an affiliate of St. James Associates.

RCL - Plans to deploy a luxury vessel from its Celebrity Cruises fleet in Abu Dhabi on a home-port basis from November 2016. The move will serve to strengthen the UAE capital’s ambition to become a major cruise hub. During peak season, the ship is expected to attract some 15,000 visitors to Abu Dhabi.

INDUSTRY NEWS

Macau Travel - According to official data, Macau dropped from fifth most popular place to sixth during the first quarter, with declining numbers of tourists. Receiving 24.1% less Chinese tourists traveling via agencies from the previous quarter, Macau is now the sixth most popular destination for them during the first quarter from the fifth most.

Macau smoking rooms - Two-thirds of Macau’s casino employees think casinos should keep their smoking rooms. According to the results of the survey, which covered 34,000 employees of all six of Macau’s casino operators.

The survey also covered casino patrons, and found that 32% of VIP gamblers would go somewhere other than Macau to gamble if smoking was banned in the city’s casinos.

MACRO

Hedgeye Macro Team remains negative on Europe, their bottom-up, qualitative analysis (Growth/Inflation/Policy framework) indicates that the Eurozone is setting up to enter the ugly Quad4 in Q4 (equating to growth decelerates and inflation decelerates) = Europe Slowing.

Takeaway: European pricing has been a tailwind for CCL and RCL but a negative pivot here looks increasingly likely in 2015.

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